Short-Term Momentum (Almost) Everywhere
64 Pages Posted: 14 Mar 2019
Date Written: February 22, 2019
Is there a short-term reversal effect outside the universe of individual stocks? To answer this, we investigate a comprehensive dataset of more than two centuries of returns on five major asset classes: equity indices, government bonds, treasury bills, commodities, and currencies. Contrary to stock-level evidence, we find a striking short-term momentum pattern: the most recent month’s return positively predicts future performance. The effect is not explained by established return predictors — including the standard momentum — and is robust to many considerations. The short-term momentum is strongest among assets of high idiosyncratic volatility and in periods of elevated return dispersion. Also, the strategy payoffs display partial commonality across different asset classes.
Keywords: short-term momentum, short-term reversal, early asset prices, long-term historical returns, equities, government bonds, treasury bills, currency, commodities
JEL Classification: G10, G11, G12, G14
Suggested Citation: Suggested Citation